Does US Foreign Aid Foster Innovation in Recipient Countries?
Boampong, Angelina H.
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Previous works studied the impact of foreign aid on economic growth with mixed results. US foreign aid promotes peace, security, and economic development, and provides humanitarian relief. These factors also spur innovation so it is assumed that foreign aid also fuels innovation. This study examines if US foreign aid impacts innovation in 146 recipient countries from 2011 to 2017. The study leverages fixed effects and ordinary least square regressions to assess the relationship between US foreign aid and innovation, while controlling for GDP, population size, and geographical region. The results of the analysis show that US foreign aid has a negative impact on innovation input factors for countries in Europe and Eurasia. GDP and population size were found to have measurable impacts on innovation under various scenarios. The results will provide useful insight in future considerations about how and when the US provides aid to other countries.